A Pakistani extremist has mocked the United States at a defiant media conference close to the military headquarters in Rawalpindi, a day after the US offered a $10m bounty for his capture.

"I am here, I am visible. America should give that reward money to me," said Hafiz Muhammad Saeed. "I will be in Lahore tomorrow. America can contact me whenever it wants to."

Analysts have said Pakistan is unlikely to arrest Saeed, founder of the militant group Lashkar-e-Taiba, because of his alleged links with its intelligence agency and the political danger of doing Washington's bidding in a country where anti-American sentiment is rampant.

Saeed, 61, has been accused of orchestrating the Mumbai attacks in 2008 that killed 166 people, including six American citizens. At the press conference he denied involvement in the attacks and said he had been exonerated by Pakistani courts.

"I want to tell America we will continue our peaceful struggle," he said. "Life and death is in the hands of God, not in the hands of America."

Saeed operates openly in Pakistan, giving public speeches and appearing on TV talkshows. He has used his high-profile status in recent months to lead a protest movement against US drone strikes and the resumption of Nato supplies for troops in Afghanistan sent through Pakistan. The supplies were suspended in November in retaliation for US air strikes that accidentally killed 24 Pakistani soldiers.

Earlier, the US deputy secretary of state, Thomas Nides, met Pakistan's foreign minister, Hina Rabbani Khar, in Islamabad for talks about rebuilding the two nations' relationship. In a brief statement, Nides did not mention the bounty offer but reaffirmed America's commitment to "work through" the challenges bedeviling ties.

On Tuesday the US said it had issued the bounty for information leading to Saeed's arrest and conviction in response to his increasingly brazen appearances. It also offered up to $2m for Saeed's brother-in-law and Lashkar-e-Taiba deputy, Hafiz Abdul Rahman Makki.

The rewards marked a shift in the longstanding US calculation that going after the leadership of an organisation used as a proxy by the Pakistani military against India would cause too much friction.

The US may hope the bounty will force Pakistan to curb Saeed's activities, even if it is not willing to arrest him. But Saeed's press conference offered an indication that was unlikely, and the bounty may even help him by boosting his visibility.

Pakistan kept Saeed under house arrest for several months after the Mumbai attacks but released him after he challenged his detention in court. It has also resisted Indian demands to do more, saying there is not sufficient evidence.